Commonwealth v Amann Aviation

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Citation: Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64

This information can be found in the Casebook: Paterson, Robertson & Duke, Contract: Cases and Materials (Lawbook Co, 11th ed, 2009), p. 624 [26.15]; 636-9 [26.60-26.80]

Contents

Background facts

  • Plaintiff [Amann] had a contract with the Defendant [Commonwealth] to provide surveillance flights.
  • When the time for performance came, the Plaintff was not really ready to fulfill its contractual obligations (the state of the aircraft being deficient].
  • The Defendant terminated the contract, and the Plaintiff sued for wrongful termination to recover its losses spent in preparing the aircraft.
  • The Trial judge ruled for the Plaintiff and gave fairly low damages. The Full court ruled for the Plaintiff and gave way more extensive damages.
  • This appeal deals only with the matter of damages, because the Defendant admitted by now that it wrongfully terminated.

Legal issues

Judgement

Mason CJ & Dawson J:

  • The Plaintiff incurred heavy expenditure in preparation. Moreover, this expenditure is completely wasted if the contract is terminated because the preparation of the aircraft was specific for that task.
  • There is also a recognition that the Plaintiff's expenses were so large that it would only start making a substantial benefit if the contract was renewed (original contract was for 3 years).
  • However, the Plaintiff cannot prove that the contract would have been renewed.
  • This means that expectation damages would be insubstantial (because the Plaintiff's expected benefit from this contract is small)
  • Instead, the Plaintiff sought reliance damages.

Deane J:

  • Where the proper expected benefit cannot be assessed, reliance damages will be used.
    • "In a case where a plaintiff has incurred expenditure either in procuring the contract or in its performance but it is impossible or difficult to establish the value of any benefits which the plaintiff would have derived from performance by the defendant, considerations of justice dictate that the plaintiff may rely on a presumption that the value of those benefits would have been at least equal to the total detriment which has been or would have been sustained by the plaintiff in doing whatever was reasonably necessary to procure and perform the contract[1]."
  • This is because it is safe to assume that the expected benefit would, at the least, cover all of the expenses in preparation for the contract.
  • Reliance damages can be described as "damages equivalent to the wasted expenditure which has been reasonably incurred in reliance upon the assumption that the contractual promises of the defendant would be honoured[2]."
  • In this case, to combat the Plaintiff's claims for reliance damages, the Defendant had to show that that the Plaintiff's expenditure would have been wasted even if the contract would have been fully performed.
  • However, it was impossible for the Defendant to show this.
  • Thus the Plaintiff was entitled to reliance damages.
  • To represent the fact that there was only 80% chance that the contract would be renewed, the reliance damages are reduced by 20%.

References

  1. (1991) 174 CLR 64, 126
  2. (1991) 174 CLR 64, 127
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